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Top-Rated Stocks the Leaders Loathe

These top-rated stocks have been marked down by top-rated investors. Are they right to have a sour puss on?

Momentum investors love to back companies with the wind in their sails. Contrarian investors typically pick up the cigar butts the market has tossed aside. So what do you call investors who turn against winners? Sourpusses? Shorts?

Over on Motley Fool CAPS, we sometimes call them the savviest investors around. When one of our All-Star players -- those whose stock-picking prowess places them in at least the 80th percentile of our community -- sours on a top-rated stock, perhaps we should take notice. Perhaps the player's found a chink in that highflier's armor, or a question mark in its financial footnotes. Or maybe it's just a hunch. That's why these tables aren't lists of stocks to buy or sell -- just starting points for further research.

Considering that on average, 96% of all investors rating these companies think they will outperform the market, what might have turned some of CAPS' top players against these otherwise widely admired companies?

Not managing well?Although it might sound like an environmentally friendly place to live, E-House is a Chinese real estate management services firm. Focusing primarily on residential properties, it works with developers to market and sell projects to newly affluent Chinese looking to find a better place to live. While that's its main business, E-House also provides secondary real estate brokerage and listing services, and it's expanding into the commercial side of the industry and into real estate investment fund management, somewhat similar to Motley Fool Hidden Gems selection Jones Lang LaSalle(NYSE:JLL).

Analysts have estimated that it has around 1% of the market, compared to around 4% for its larger U.S. peers operating in China. Moreover, real estate companies are being pressured by the government's attempts to control price inflation. The state has adopted regulations to rein in speculation in real estate, but while prices rose at an annualized rate of 38% between 2001 and 2005, according to one Chinese research firm, and investment in Chinese properties is up 32% in the first four months of 2008, the rate of growth is sliding. Residential transactions fell 13.7% in Beijing from March to April, and were down 56.4% from a year earlier, according to the China Index Academy.

Some investors might believe that while China is still "hot," its real estate market might continue to cool, which could spell trouble for E-House. Last summer, top-rated CAPS All-Star tenmiles noted that government intervention in the market last August could cut E-House's shares:

Century 21 of China seems fairly valued here. Reports Wednesday which may give it another pop, but Chinese real estate due to cool somewhat due to government interventions - more restrictions on brokerage/higher interest rates. Likely to be able to buy this fast grower in the low teens again within the next year - would load up then.

He was prescient enough to predict the "pop" that would follow -- shares nearly doubled in price -- but now they've fallen back by half again, to the same level they were before. Without question, the naysayers are in the minority when it comes to E-House -- 97% of all investors rating it on CAPS think it will outperform the market. However, with its share price falling back so far, perhaps more investors might begin to discover cracks in the foundation of China's housing market.

Make lemonade from lemonsWe've seen some investors' opinions on these companies' fortunes, but Motley Fool CAPS is more than what the pros think -- even if they're All-Stars. We invite you to share your thoughts and insights and add your voice to the debate. Go ahead, have your say. We're eagerly waiting!

Author

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.